Posted by: the3rdi | February 14, 2010

How To Avoid the 50% Tax Rate

With the introduction of a 50% tax rate we are now only weeks away from the UK moving back to the realms of a high tax country.

There is much discussion about how the full impact can be averted with some individuals making plans to leave the UK altogether.

Primary new rules include:

~ New top income tax rate of 50% applies to those with incomes over £150,000 from 6 April 2010.

~ National insurance employee rate rises.

~ Phased elimination of personal allowances for those with incomes exceeding £112,950.

Generous UK tax relief on pension contributions that have been available since April 2006 will be restricted significantly for those with incomes of at least £150,000 per annum.

Potential Solutions:

~ Advancement of income or profit shares pre-5 April 2010 – designing subsequent deferral mechanisms into Employee Benefit Trusts (EBTs) and Employer Funded Retirement Benefit Plans (EFRBs).

~ Maximising share incentives where capital gains (currently at 18%) can be maximised, either under approved plans or by designing incentive restrictions with a prospectively small income tax burden at present, in favour of longer term capital gains tax on growth thereafter.

~ Those who are now, or have in the past, been taxable in the UK on the remittance basis have the opportunity to accelerate income through making remittances to the UK before 6 April 2010.

Difficult to plan against the full exposure to the new higher rates.

Desire to pursue a capital gains tax rate of 18% in the UK becomes more powerful.

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